JAKARTA (TheInsiderStories)—Indonesia has an ambitious goal to increase the share of renewable energy in the country’s energy mix to 23 per cent by 2025. But the country has so far been moving at a snail’s growth in the development of renewable energy.
The country’s energy mix currently only reached 11-12%. As of end 2016 only 8.8 GW has been tapped, mostly hydro-power plant and geothermal, equal to 7 per cent of the country’s energy mix.
Some obstacles are faced by the investor to boost the renewables. The main obstacles are the high initial cost due to imported technology, the difficult financing, lengthy investment permit process, land acquisition issues, and lack of a reliable data system on renewable potential resources and feasible projects that leads to cost overrun.
Many renewables energy companies change over to other business because of the obstacles, but PT Supreme Energy sticks on the geothermal. In order to gain the insight of what the investors think about the renewable especially geothermal industry. TheInsiderStories interviews President and CEO of PT Supreme Energy Supramu Santoso.
Q: How is the progress of Supreme’s Business?
We will start the construction of geothermal plants in June this year and targets the operation in 2020. It takes around three years. The project capacity is 91 megawatt.
Q: It is your first project?
No, we earlier drilled some geothermal wells, but we should continue to drill around 13 wells.
We currently have three geothermal concession in West Sumatra, South Sumatra, and Lampung.
Q: How much is the potential power capacity of the project?
Around 80 megawatts in West Sumatra project.
Q: How about the other projects?
In South Sumatra project, we will start drilling in July this year. For Lampung project, we hope we can build a road to the project this year.
Q: How much is the total capacity of the project?
We do not know. It depends on. It is difficult to estimate. In the past, we expected around 600 megawatts for the three projects but the exploration result is different. So we do not dare to estimate, we hope to discover around 200 megawatts.
Q: Do you have a project that already in production phase?
The West Sumatra project will on stream on 2019, approximately 86 megawatt of gross production.
Q: How much is the investment for the three projects?
I forgot, but we have a loan of US$1 billion for the two projects [the West Sumatra project and South Sumatra project].
Q: The renewables business faced many obstacles, but are your company stick in this industry?
When we first entered the geothermal industry, it was very promising. The energy demand projected to grow around 9% per year while the oil and gas production dropped. In addition, Indonesia has huge geothermal sources. So, I was thinking that it’s a good investment, but it is not easy.
Q: Why Supreme still stick on this business even though the investment is very high with the uncertainty return?
I am from Surabaya [East Java], we have a strong will. We already entered this business, so we must show that we keep trying.
Q: Do you have a partner in these projects?
Of course. If we have not any partner, we cannot finance these projects. These projects need a huge investment of million hundreds dollar. For the South Sumatra, we invested US$400 million for exploration, that our company’s money. We have Japanese and France partners.
Q: How are your partners’ opinion about the geothermal industry in Indonesia? Do they still attracted
They strongly support our company.
Q: They does not want to change over to other profitable business?
We focus on the three projects.
Q: Do your company have other plans for other business or other concessions?
We have another planning. We focus on the three projects. I will retire when I am 70 years old.
Q: How about change over to other business outside geothermal?
No, we want to focus on the geothermal because of we expertise in this industry. But we will see the investment climate.
Q: How is your opinion about the geothermal potential in Indonesia?
The government said the geothermal potential is 29,000 megawatt but I think it will lower than that after the exploration.
Q: Do your company interested in the nuclear development?
Nuclear in Indonesia is so political, it is full of controversy. But someday we should develop nuclear as power energy source because the limited availability of fossil energy, the geothermal also limited available. If our energy demand increase over and over, we should develop nuclear.
Q: How do you see the prospect of renewable business in Indonesia?
We always discuss with the government to push the projects. I know the government concern. They want affordable energy price. That is the point of our discussion, how to boost investment with incentives, etc.
Q: What is the regulation that needs to reform to boost the investment in this sector?
The government has tariff constraint, the energy tariff should be affordable. So, we discuss the non-tariff incentives for examples the tax incentive and the infrastructure development. The government currently examine the geothermal fund. I hope it will go through implementation.
Q: How is the progress of the geothermal fund?
I am not involved in the geothermal fund’s discussion, so I don’t know much about this.
Q: The geothermal fund will help the renewable company to boost the investment?
Yes, of course, if the private sectors can access the fund. But currently, it only allows the state-owned companies to access the fund.